1. Customer Satisfaction and Compensation

2. The Customer-Product Matrix
Convergence
selling
New business
development
New
Customers
Account
management
Leverage
selling
Current
Current
New
Products
The Customer-Product Matrix

3. Compensating Salespeople
Comp Type Best Performance Impact
* Motivate effort on non-selling activities
Salary * Adjust for differences in territory potential
* Reward experience and competence
Commissions * Motivate a high level of selling effort
* Encourage sales success

4. Compensating Salespeople
Comp Type Best Performance Impact * Direct effort toward strategic Incentive objectives Payments * Provide additional rewards for (Bonus) top performers * Encourage sales success Sales * Stimulate additional effort Contests targeted at specific short- term objectives

5. Compensating Salespeople
Comp Type Best Performance Impact
Personal * Satisfy salespeople’s
Benefits security needs
* Match competitive offers

6. Use of Compensation Plans
Percentage of
Companies Using
Straight Salary
Straight Commission
Combination Plans (83%)
Salary Plus Bonus
Salary Plus Commission 20
Salary Plus Bonus Plus Commission 18
Commission Plus bonus
Total %
Source: Adapted from Sales Compensation Concepts and Trends (New York: Alexander Group, 2004).

7. Customer Satisfaction and Compensation
IBM places significant resources toward monitoring customer satisfaction.
All customers are surveyed annually on:
Overall customer satisfaction
The rep’s knowledge of the customer
The transaction or solution itself
How satisfied the customer is with the solution
The installation process (smooth or disruptive), including how long it took
The extent and clarity of the education provided
The time needed to get the application(s) up and running
The capability and speed of technical support

8. Customer Satisfaction and Compensation
Results are benchmarked against prior IBM performance, as well as the competition
Results are used for compensating sales reps and managers.

9. Compensation Levels for Firms using Salary Plus Incentives
Total
Salary Incentive Compensation
Position ($000) ($000) ($000)
Top Sales Executive $ $ $120.0
National Account Manager
Regional Sales Manager
District Sales Manager
Key Account Rep
Senior Sales Rep
Intermediate Rep
Entry Level Rep
Sales & Marketing Management Compensation Survey, 2005

10. Compensation Levels by Account Relationships, 2005
ENTERPRISE RELATIONSHIPS $121,800
Customer solution more important than price; team selling approach
$64,400
$43,300
CONSULTATIVE RELATIONSHIPS $97,100
Creates new value; tailors product to customer needs
$62,700
$42,300
TRANSACTIONAL RELATIONSHIPS $83,300
Sells on price; product is a commodity
Top-Level
Mid-Level
Entry-Level
$52,500
$36,700

11. Selecting Benefits Salespeople expect cars or allowances
Insurance and travel are very common
Some plans offer a choice of alternatives

12. Compensation Methods A. Straight Salary Control wage levels
easier to control rep’s activities
increases loyalty to firm
fails to provide incentives
high costs when sales are low
most common in complex business selling

13. Compensation Methods B. Straight Commission maximum incentive
all variable cost
low costs when sales/salesperson
is low

14. Compensation Methods B. Straight Commission hard to control reps
low loyalty
pay low when business is weak
used in small firms, door-to-door, retail sales, insurance, stock brokerage, printing

15. Compensation Methods C. Combination Plans Most common today
1. Salary + Commission
base for non-selling activities
commission for incentive to push complex industrial accounts

16. Compensation Methods C. Combination Plans Most common today
2. Salary + Bonus
base for non-selling activities
bonus to reward completion of special tasks in consumer products selling
3. Salary + Commission + Bonus
rewards every activity, BUT costly to administer

17. Benefits Offered by Companies
Percentage of
Firms Offering
Benefit
Hospital costs %
Life insurance
Dental plan
Long-term disability
Pension plan
Short-term disability
Profit sharing
Thrift savings
Employees stock purchase plan 21

18. Compensation Methods - Recap
COMP TYPES
BEST PERFOMANCE IMPACT
Motivate effort on non-selling activities
Adjust for differences in
territorial potential
Reward experience and competence
Salary
Motivate a high level of selling effort
Encourage sales success
Commissions
Direct effort toward strategic
objectives
Provide additional rewards for top
performers
Encourage sales success
Incentive
payments
(bonus)
Source: Adapted from Sales Compensation Concepts and Trends (New York: Alexander Group, 2004).

19. Compensation Methods - Recap
COMP TYPES
BEST PERFOMANCE IMPACT
Stimulate additional effort targeted at
specific short-term objectives
Sales
contests
Satisfy salespeople’s security needs
Match competitive offers
Personal
benefits
Source: Adapted from Sales Compensation Concepts and Trends (New York: Alexander Group, 2004).